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Millions Owed: San Diego Pension-Slashing Measure Rebuked by Board; Legal Warfare Expected

Former San Diego mayor/pension crusader, Jerry Sanders

Former San Diego mayor/pension crusader, Jerry Sanders

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In 2012, San Diego voters approved Proposition B by a two-thirds majority, dramatically cutting city employee retirement benefits.  But to close out 2015, the state Public Employment Relations Board (PERB) ruled that unions had the right to input in the matter before voters essentially ripped up their union contracts at the ballot box. The PERB has ordered the city to spend millions creating retroactive pensions for the nearly 2,000 employees hired by the city since Prop B went into effect, who currently receive a 401(k) style retirement plan.  

Labor leaders want the city to accept the PERB’s order and begin finding ways to manage the expensive situation at hand.  Opponents are urging the city to appeal and take the battle to the California 4th District Court of Appeal.  The PERB order will not only force the city of San Diego to retraoactively create pensions for the nearly 2,000 workers, but will have the city pay 7 percent interest as well as all attorney fees.  The costs are unknown, but even Michael Zucchet, general manager of the Municipal Employees Association, admits that they could be staggering:

“The city’s bill is going to keep accumulating with interest, and it will only get more expensive if they keep filing appeals.  I don’t know whether it’s $5 million or $500 million, but if I had to guess I’d say it’s somewhere in the $100-million range.”

When passed in 2012, Proposition B not only changed city employees’ retirement plans, but capped the city’s payroll at 2011 levels for five years and removed the city charter’s requirement that a majority of city employees had to vote in favor of any changes made to retirement benefits.  The changes to the pension system for new city hires did not pertain to police officers, although their pension will now max out at 80% of the individual’s salary, not the current 90%.

The city is expected to appeal the ruling. Both sides admit that no matter the outcome there are major questions to be asked about how to proceed, including whether the 2,000 workers receiving retroactive pensions will be forced to make retroactive matching payments.  Speaking to the Los Angeles Times, Michael Zucchet said his sympathy for the city is limited, noting, “One thing we agree on is, this is a huge can of worms in terms of questions.”

At the heart of the PERB’s decision was the fact that the former mayor of San Diego decided to put his name on the petition, but as a private citizen.  The Voice of San Diego touched on this in their piece on the PERB ruling, providing some background:

It goes back to the discussions about how to get the measure, Proposition B, on the 2012 ballot. The mayor is the city’s chief labor negotiator and state labor law clearly states that city employees are entitled to bargain for their benefits. Sanders and others tried to get around this by saying that he was acting as a “private citizen” not the mayor by backing the initiative. Had Sanders tried to negotiate the deal with labor groups, it’s likely the majority of the City Council would have stymied him. But he also had the option to let others do the initiative themselves. Labor unions sued throughout the process…

Current San Diego Mayor Kevin Faulconer, who supported the initiative as a councilman in 2012, has gone on the record as saying he hopes the city will appeal the PERB decision.  His spokesman, Matt Awbrey, said:

“Mayor Faulconer believes the will of the voters should be upheld and is confident that an appellate court will affirm the right of the San Diego people to enact pension reform.  The City Attorney’s office will be bringing the matter to the Council as quickly as possible.”

Ed Harris, spokesman for the San Diego Lifeguard Association, said that Prop B has already hurt the city in terms of recruiting, and asserted that the legal mess will only further hurt taxpayers:

“Sanders and Faulconer touted this as such a victory for the taxpayers, but the reality is, it will end up costing the taxpayers … the savings were all out of the five-year pay freeze.


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